Matt highlights this genuinely bizarre passage in a Times article about the labor dispute at GM:
Beyond the bookkeeping effect of VEBAs, the health care funds could create a kind of incentive for Detroit companies and the union to modify their behavior.Paying the high borrowing costs caused by their low debt ratings meant the Detroit companies had to keep wringing profits from big vehicles like sport utilities and pickups, rather than shifting to the smaller models with better fuel economy that consumers were demanding.Likewise, U.A.W. members, assured of health care benefits that were the envy of the labor movement, had little incentive to take better care of their health, since their generous coverage would pay for most any ailment.By contrast, Toyota, which pays premiums only for workers, not their families, has fitness centers at its factories and requires newly hired workers to exercise two hours a day during their training period.
Matt identifies the most obvious problem: assertions about a moral hazard that are both unsupported by evidence and utterly illogical. The idea that people will have no incentive to avoid debilitating illnesses and take care of their bodies as long as their health treatments are paid for is so bizarre I make a mental note to stop taking anyone who says it seriously. But in addition, the article doesn't even support the premise. If employees at Toyota have such a powerful incentive to stay healthy, why are they required to work out? And isn't it their non-insured family members rather than the insured workers who have the incentives? The next time you're informed about the "liberal" bias at the Times, however, remember the news story claiming that Toyota failed to provide health benefits to their employees' families ... for their own good! --Scott Lemieux
